Construction Company Reports: Buyers returned to storm apartments

Stock market companies are about to conclude one of their best years, with rising profits and stock returns

Rosh HaAyin Buildings of a Price to the Resident (Photo: Reuven Castro)

Rosh HaAyin Buildings Real Estate Price (Photo: Reuven Castro)

The residential real estate sector in Israel is again in bloom. After a period when home buyers seemed to be "sitting on the fence," the financial statements of construction companies for the third quarter of 2019 show a sharp increase in the number of homes sold, along with a substantial increase in income and profits.

With the support of tens of percent increase in the number of apartments sold by operating companies in the field, their shares also enjoy delicacy. Just before the end of 2019, the bourse construction companies appear to be closing in on one of their good years, with sharp increases in double-digit rates and more - sending many of them trading at record highs.

The data of 12 construction companies traded on the stock exchange for the first nine months of 2019 show that the number of apartments sold during this period jumped by more than 40%, reaching about 4,850 apartments, compared to some 3,400 apartments sold by the same companies in January-September 2018. Record highs in the domestic mortgage market Against the backdrop of low interest rates, they also provide an explanation for a surge in activity, with mortgages totaling NIS 50.5 billion from the public tranquil between January and September - an amount likely to make 2019 a record year in terms of mortgages.

This is what the third quarter of food chains in Israel looks like

Uncertainty supports the flow of demand for apartments

Alongside the low interest rates, which continue to fuel the market, the intensity with which the "Price to Buyer" program was promoted earlier this year is at the heart of the increase in sales presented by companies - and those involved in such projects stand out in relation to competitors. Initially, the goal of the "Price to Housing" program was to lower house prices, and later the goal was "to make it easier for young families to buy a first apartment under preferred conditions." Since it launched about four years ago, the plan has been criticized quite a bit, in part by contractors, but the increase in activity shows that the construction companies involved have no reason to complain.

Having enjoyed involvement in projects under the plan, construction companies now believe that the uncertainty about the future of the price to the consumer, given the uncertainty in the political system, supports demand that continues to flow into new apartments in Israel, after some buyers have been delayed by buying an apartment so far, which will lead to Decrease in market prices. Alongside this, some of the reports show that the effect of selling apartments in price projects to the buyer has decreased in the average price of the apartments sold.

It should be noted that some companies have enjoyed sales growth even without involvement in price projects to the buyer, and the companies that have been involved in costing the buyer have supported the acceleration in sales, and have enjoyed sales growth in other projects. According to the relevant accounting standards, construction companies report their income according to the rate of execution, and are affected by the sale of apartments in construction projects and the rate of progress - so it seems that the direction presented by the companies in their reports, may continue into the next year.

Shay Lipman, real estate analyst at Valio Bayes Real Estate, estimates that "a reduction in supply along with an increase in demand, due to a market understanding that a price-per-consumer plan will not continue, coupled with low interest rates, will lead to a high rate rise in 2020".

The increase in the sale of apartments in Israel

Increase in house sales in Israel (Photo: Globes, PR)

The cost-per-engagement engagement has supported the sales surge

Among the major players in the residential real estate market in Israel, in the first nine months of 2019, is the involvement of Azorim in price-per-housing projects, which supported a threefold increase in the number of apartments sold, approaching 770, compared to about 250 apartments sold by the company between January As of September 2018. The sales segment of Azorim shows its involvement in price-per-buyer projects, which supported the jump in sales, with the sale of about 330 apartments in Shoham and about 100 apartments in Kibbutz Galilee, near Herzliya, which together constitute more than half of the apartments sold.

Azorim reports in the reports that from the end of September until the date of its publication, in recent days, it has sold about 100 additional apartments, while showing a 15% decrease in the average apartment price it sold, which amounted to NIS 1.7 million, compared with NIS 2 million in the corresponding period in 2018 . The company, which is under the control of Hershey Friedman, essentially attributes this decline to "a significant sale of housing units to eligible projects under a cost-per-plan plan, where the average sale price was about NIS 1.5 million," adding that the average sale price excluding these apartments kept Stability in relation to last year, at about NIS 2 million.

The growth in activity is also reflected in positive financial results, and Azorim shares also enjoy the positive environment, which stands out positively by doubling its value since the beginning of the year - an increase that led it to trade around its peak levels, worth about NIS 1.4 billion.

Also among the most prominent companies in the industry, Africa Residential also enjoys a price per dwelling, showing a jump of more than 50% in the number of apartments it sold - which amounted to approximately 640 apartments. According to the company, managed by Oren Hod, about 330 of these apartments were sold to eligible residents from a cost-per-plan plan. In support of the improvement in activity, Africa's residential stock has almost doubled its value, and it is also trading around its peak levels, reflecting the company's present value of about NIS 1.2 billion.

Also among the biggest sellers this year, who also enjoyed a price plan for the buyer, Ashtrom Group of Ashtrom, which reported a "marked increase in house sales," accumulating to more than 700 between January and September, compared to less than 400 apartments in the first three quarters of 2018. Eshder's projects under the government plan in question, mainly in Tirat Carmel, accounted for almost half of its quarterly sales, and included close to 150 apartments.

Among the smaller companies, Hanan Moore stands out, with close to 240 apartments sold in three quarters, compared to less than 40 apartments sold in the first three quarters of 2018, thanks to the "Daffodils" project in Rishon Lezion, which also houses most of the apartments for the eligible price To the resident, where the company has sold more than 170 apartments.

Hanan Moore shares are at the bottom of the table relative to competitors in terms of performance since the beginning of 2019, despite a handsome return of about 30% recorded during this period, reflecting the company's present value of just over NIS 300 million. From the beginning of the year until mid-October, Hanan Moore's share, led by Hanan Moore and Avi Maor, posted a jump of more than 60% and reached a record level, but has so far moved away from it by about 20%.

The level of returns among the companies is notable for Parshkovsky's share, which has jumped 165% from the beginning of the year to date, to a record level that reflects the company's value of NIS 1.1 billion, supported by positive financial results, despite a considerable decline in the number of apartments it sold. Parshkovsky explains that, in accordance with the accounting standards, "the recognition of income from the sale of residential apartments is carried out over time, according to the rate of performance of the contract." The considerable improvement in its income is attributed to the company, which is controlled by the Parshkovsky family, "differences in the amount of apartments sold and their execution rate."